If you have received a letter warning you that your student loans are in default and threatening garnishment of your wages, or if your employer is already garnishing your wages, you should review your options carefully. You can challenge a student loan wage garnishment based on:
- your income
- your employment status
- the procedures that were followed in starting the garnishment, or
- several other reasons.
The earlier you address a student loan wage garnishment, the more likely you will be successful in reducing or stopping the garnishment. This article addresses the rules for garnishment of federal student loan debts. The rules for private student loans are different.
(Learn the difference between federal and private student loans.)
Why Is Your Employer Garnishing Your Wages?
Garnishment cannot happen unless you are in default on your student loans. Default for most federal student loans is defined as failure to make a payment for 270 days. Default for your particular loan may be different—you can find out your loan’s default rules by reading the promissory note that you signed when you took out your loan.
When you are in default, your loan servicer (which may be the federal government or a contractor for the federal government) can start the garnishment process with your employer. The loan servicer contacts your employer to determine your earnings. Based on the information provided by your employer, the servicer calculates the amount that can be legally garnished from your wages, usually 15% of your disposable earnings.
You Should Receive Prior Notice and a Chance to Object
Your loan servicer is required to give you 30-days’ notice before garnishing your wages. The Notice of Intent to Garnish must include the following information about your rights:
- your right to request and inspect copies of your student loan records
- your right to request a hearing to present evidence that the garnishment should not be allowed, and
- your right to enter into a repayment plan with the loan servicer.
Read the notice carefully. If garnishment occurred less than 30 days after the date of the notice, or if the notice does not contain the required information, that is a reason to request a hearing. If the servicer used improper procedures, the servicer will have to start over with the correct procedures.
Find detailed information on dealing with student loan debt in Solve Your Money Troubles.
Requesting a Hearing to Put the Garnishment on Hold
If you request a hearing within 30 days after the date of the Notice of Intent to Garnish, the garnishment is put on hold. (For some types of federal student loans, you must request a hearing within 15 days. The relevant time period should be in the garnishment notice.) If 30 days have already passed, the garnishment will proceed. However, you can still request a hearing, and the garnishment will end if you win your hearing.
Reasons to Request a Hearing to Challenge a Student Loan Wage Garnishment
The most common reason to request a hearing is to claim that garnishment of 15% of your disposable earnings will impose a “financial hardship” on you or your dependents. The form to claim a financial hardship is available from the Department of Education’s website, at www.myeddebt.com. Whether the garnishment would impose a financial hardship is determined according to your family size, income, and expenses.
Other reasons to request a hearing include:
- You don’t owe the money (you have repaid your loan, the loan was forgiven, or any other reason that you do not owe the money).
- You were involuntarily terminated from your last job (i.e., you did not quit) and you have held your current job for less than 12 months.
- You are currently making payments under a repayment agreement.
- You have filed for bankruptcy. All collection activity must stop while a bankruptcy petition is pending. (Learn more about student loans in bankruptcy.)
- You qualify for forgiveness, cancellation, or discharge of your loan. The Department of Education’s website, at studentaid.ed.gov, provides details on many circumstances in which you could qualify for discharge. These include discharge because your school closed before you could finish your program, public service loan forgiveness, and discharge for total and permanent disability. (To learn more about these programs, visit our Student Loan Debt area.)
The Notice of Intent to Garnish should include a complete list of reasons to request a hearing. The Department of Education’s website has a form you can use to request a hearing at www.myeddebt.com. Most hearings take place over the phone. You can request an in-person hearing in Atlanta, Chicago, or San Francisco, but you must cover your own travel expenses.
Make Sure the Garnishment Is for the Right Amount
The amount of money that a student loan servicer can garnish from your paycheck is determined using complex rules. In general, the student loan servicer can only collect 15% of your disposable income through garnishment. “Disposable income” is the income left over after paycheck deductions. If your income is very low, you may be exempt from garnishment—if you earn minimum wage and you work 30 hours a week or less, you are probably not subject to garnishment.
A student loan garnishment calculator is available at www.money-zine.com. Check the result against your pay stub. If your employer is taking too much out of your paycheck, contact your loan servicer and request a correction. If necessary, request a hearing to correct the amount.
Stop Garnishment With Voluntary Payments
The goal of any loan servicer is to set up regular payment on your debt. Even if you have experienced garnishment for many months, you may be able to stop the garnishment by contacting the loan servicer to set up a payment plan. Voluntary payments have many advantages over garnishment: you will not have collection costs added to your loan, you may be able to improve your credit rating, and you may be able to reinstate eligibility for federal student loans in the future.